Average UK property price hit record £289k in May, Halifax says – but growth is slowing

Are we past the peak sellers’ market? Average UK house price hit record high of £289k in May – but rate of growth is slowing, Halifax says

Average cost of a home in the UK reached £289,099 in May, Halifax saysProperty prices increased by 1% in the past month, the figures showBut the pace of annual property price growth slowed in May, lender adds 

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The average house price in the UK hit a record high of £289,099 in May, but the market is showing signs of cooling, according to new figures from Halifax.

The average price tag for a home jumped by £2,857 month-on-month in May, with prices rising one per cent. This was the eleventh consecutive monthly increase in property prices. 

On average, house prices have surged by 74 per cent in the last decade, Halifax said. 

In the year to May, average property prices increased by 10.5 per cent, and while this figure remains in double-digits, it is the slowest pace of annual growth seen since the start of the year.  

Record: The average house price in the UK hit a high of £289,099 in May, Halifax says

An imbalance between supply and demand for properties remains the primary factor driving the climb in house prices, the report added. 

Northern Ireland had the strongest annual house price inflation in May, seeing prices swell by 15.2 per cent.

The South West of England also recorded a strong rate of annual growth at 14.5 per cent.

In Wales, house prices jumped by 13.7 per cent annually, pushing the average house price there to a record £216,120.

Only Yorkshire and the Humber, Scotland and London recorded annual house price inflation below 10 per cent in May.

In Scotland, house price growth continued to ‘underperform’ relative to the UK average, according to Halifax, with annual inflation at 8.3 per cent.

A decade ago, annual house price growth in London was the strongest in the UK, with annual house price inflation of 4 per cent.

Looking back: Property prices have surged by 74% in the last decade, Halifax said

Southern England was at that time leading a recovery in property prices following the tough economic climate of 2008 and 2009.

Over the past decade, the cost of the average home in the UK has risen by 74 per cent, or £123,016, Halifax said.

Annual property price shifts near you

Here are average house prices in May and the annual increase, according to Halifax:

– East Midlands, £239,859, 12.3%

– Eastern England, £337,216, 11.6%

– London, £541,942, 6.3%

– North East, £166,449, 10.6%

– North West, £219,849, 10.6%

– Northern Ireland, £185,386, 15.2%

– Scotland, £198,288, 8.3%

– South East, £391,845, 11.4%

– South West, £305,173, 14.5%

– Wales, £216,120, 13.7%

– West Midlands, £244,071, 10.6%

– Yorkshire and Humber, £200,469, 9.5%

Source: Halifax 

The strongest inflation over that period has been in London (84.2 per cent), followed by the East of England (84 per cent) and the East Midlands (82.1 per cent).

In cash terms, London house-hunters need £247,638 more than those looking 10 years ago, whereas those in the East of England need £153,930 and those in the East Midlands would typically need an extra £108,116.

Russell Galley, managing director, Halifax, said: ‘The average cost of buying a home in the UK is up 1 per cent, or £2,857, on last month, and has now risen for 11 consecutive months.

‘Annual growth also remains in double-digits, at 10.5 per cent, although this is the slowest rate of growth seen since the start of the year.’

He added: ‘For house-hunters, the extent of the impact of property price inflation continues to be linked to the type of home they are looking to buy.

‘Compared to May last year, you’d need around £10,000 more to buy a flat, but an additional £50,000 for a detached home.

‘This clearly creates a knock-on effect for those looking to make their first home move, as the rungs on the housing ladder have become increasingly wider.

‘However, the housing market has begun to show signs of cooling.

‘Mortgage activity has started to come down and, coupled with the inflationary pressures currently exerted on household budgets, it’s likely activity will start to slow.

‘So, there is perhaps one green shoot for prospective purchasers – with overall buying demand down compared to last year, we may be past the peak sellers’ market.’

Fluctuations: Annual and monthly property price fluctuations, according to Halifax

Latest Bank of England figures showed the number of mortgages approved to finance house purchases fell by 5.1 per cent in April to 65974. Year-on-year the April figure was 23 per cent lower than the level seen in April 2021. 

Amid surging inflation and a cost of living squeeze, it remains to be seen how property prices will shape up for the rest of the year. Some experts think prices will, in some parts of the UK, start to fall.

Looking ahead, Martin Beck, chief economic advisor to the EY Item Club, said: ‘The EY Item Club thinks house price inflation will ultimately decelerate. 

He said: ‘Demand is likely to decrease as some affordability measures are stretched to an unprecedented degree, with both house prices-to-income and mortgage-to-income ratios sitting at record levels. 

‘Mortgage rates are on the rise, with the average interest rate on a new mortgage sitting at 1.83 per cent in April, a six-month high. 

‘And the prospect of households seeing a fall in real incomes this year, as high inflation bites, means fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates.’

He added: ‘But that house prices have continued to rise strongly, despite a cost of living squeeze and rising mortgage rates, indicates that the market enjoys several factors in its favour. 

‘Eighty per cent of mortgages are on fixed rates, meaning many borrowers will only encounter higher borrowing costs when they come to refinance after the worst of the cost of living squeeze should have passed.’

Iain McKenzie, chief executive of The Guild of Property Professionals, does not believe a significant correction is on the cards.

He said: ‘The market has seen some unusually high levels of activity of over the past two years, so it was expected that we would start to see the market cool down to some degree, especially with cost of living pressures mounting.

‘Since 1931, there have only been 16 years of house price decline, with every other year seeing rises. A significant readjustment in the market seems unlikely anytime soon.’

Regional shifts: Changes in property prices in different regions across the UK

Myron Jobson, a senior personal finance analyst at investment platform Interactive Investor, said: ‘Those who have been priced out of the property market will hope the slowdown will ultimately lead to a fall in prices. 

‘Rising borrowing costs coupled with more housing inventory could result in slower home price growth, but it could be some time before we see declines in prices.’

Boris Johnson  is set to draw on the legacy of Margaret Thatcher and extend the right-to-buy scheme to millions more people across the UK.

Johnson wants those who rent properties from housing association to have the chance to buy them at a discount.

Under the current policy, council tenants can get up to 70 per cent off the market price, depending on how long they have lived there. But, the scheme is much more restrictive for those who want to buy from a housing association.

The original right-to-buy policy, introduced in 1980, was one of the flagship policies of the Thatcher government. Previously, both David Cameron and Theresa May pledged to extend the scheme but failed to follow through. 

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